The deterioration in German industrial sentiment shown by the ifo test is a warning signal. Worrying is the second consecutive monthly drop in business expectations. Although to date it had seemed that German companies had largely shrugged off the economic impact of the Brexit vote, this suggests that especially the manufacturing sector and wholesale could see a slowdown. On the other hand, however, business expectations in the services sector have now improved three months in a row. Broadly speaking, business surveys taken during the summer months need to be treated with more caution than usual due to irregularities in the holiday timings.

Allianz SE
Munich, Aug 25, 2016

It was anyway not on the cards that the relatively buoyant economic momentum seen in Germany in the first six months of 2016 would continue unabated in the second half of the year. In the first half the German economy had grown at an annual rate of over 2%. But we still see the economy heading up in the second half of the year, albeit at quarterly rates of only 0.3 to 0.4%. This would produce average growth this year of around 2%. This favorable annual average is also attributable to the fact that the Federal Statistical Office has revised up year-on-year growth in the first quarter a tad, improving the starting point for 2016 growth.